Cybart: Understanding Apple's services machine

Apple has been providing services to its customers for years, including everything from extended warranties to content for devices like Mac and iPod. Now, with behemoths like the App Store, ongoing subscriptions like iCloud and Apple Music, and coming video and magazine content, those numbers are only going to get bigger.

Apple currently has more than 270 million paid subscriptions across its services, up over 100 million year-over-year. My suspicion is that a good portion of those subscriptions are content subscriptions. Apple is currently developing two new paid services for delivering content: Apple Video and a paid tier to Apple News. Each service will likely be given a long-term target of having at least 100 million paying users. In addition, Apple is in a good position to benefit from growing momentum for video streaming services including Netflix, HBO, and Hulu. It is not a stretch to claim that Apple will one day have 500 million paid subscriptions across its services.

Apple isn't becoming a services company. Instead, Apple is building a leading paid content distribution platform.

Neil breaks down the numbers to estimate how much revenue is coming from each component of the services business, which is fascinating to see. It's his overall point, though, about how Apple is looking at the business that's key.

Services depend on devices but make those devices more valuable. It's a virtuous cycle for Apple right now, and one the company seems intent on rounding out and expanding in the future.

I'm still wondering if Apple Video (the original television content being produced) and Apple Magazines (the Texture-based news service) will be sold separately alongside Apple Music, or if there'll be some unified Apple Media option as well.

Either way, it's still just a beginning. Health and other services, beyond content, have a huge potential upside as well.